Squarespace Earnings: User Growth and Pricing Upside Round Out Strong Year, but Shares Are Pricey

No-moat Squarespace reported fourth-quarter and full-year fiscal 2023 results, which fell marginally below our above-guidance revenue expectations and short of our profitability forecasts as domain registration fees dragged on gross margins. Nonetheless, the firm achieved robust net new user growth throughout 2023 and enjoyed resilient retention despite legacy like-for-like price increases. Following the result, we maintain our longer-term outlook but raise our fair value estimate to $27 per share from $26 on the time value of money. At current prices, Squarespace shares screen as overvalued, and we see better opportunities among our moatier companies on our coverage list.